Asia markets slip after North Korea accuses Trump of declaring war

Japan’s Nikkei 225 sank 0.28 percent in early trade after the yen strengthened overnight as investors focused on North Korea.

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Asian markets were pressured in early Tuesday trade, following declines on Wall Street overnight, as the war of words between North Korea and the US escalated.

Japan’s Nikkei 225 sank 0.28 percent in early trade after the yen strengthened overnight as investors focused on North Korea.

Down Under, the S&P/ASX 200 wobbled around the flat line. The index edged down 0.01 percent in early trade. The 1.91 percent gain in the energy sub-index was offset by losses in retailers and telecommunication services stocks.

Geopolitical tensions came to the fore again overnight after North Korea’s foreign minister said U.S. President Donald Trump had declared war. Foreign Minister Ri Yong Ho said that meant the North could target and shoot down US bombers in return. The White House responded that the US had not declared war on the hermit state late on Monday.

The ramp up in saber-rattling followed Trump’s speech at the United Nations last week, where the president had warned that if forced, the US would have “no choice but to totally destroy North Korea.

Safe haven assets were buoyed, with spot gold held above the USD 1,300 level reached overnight. The yellow metal, often regarded as a safe haven in times of geopolitical uncertainty, traded at USD 1,309 an ounce at 8:26 a.m. HK/SIN compared with the USD 1,290 handle most of last week.

The Japanese currency held onto overnight gains to trade at 111.63 yen to the dollar at 8:11 a.m. HK/SIN after trading at the 112 handle during Asian trade on Monday.

The Yen had firmed slightly following the release of the Bank of Japan’s July minutes on Tuesday. The minutes indicated policymakers were optimistic about consumer prices, with some stating that a 2 percent inflation target was a global standard.

Markets stateside were jittery on Monday, with a fall in technology stocks adding to declines in major indexes. The Dow Jones industrial average shed 0.24 percent, or 53.5 points, to close at 22,296.09.

Analysts said North Korea’s accusation that Trump had declared war had made markets nervous.

“The comments have taken the wind out of the sails just when risk was looking fairly upbeat as we headed into Europe, despite the uncertainty around the elections. That said, it’s hardly panic selling and the moves look measure and contained,” said Chris Weston, chief market strategist at IG.

Elsewhere, the Euro edged up after retreating following the German election on Sunday. While provisional results showed German Chancellor Angela Merkel’s party had the most votes, she will likely face a tough coalition negotiation. Support for a far-right party was also larger than expected. The common currency traded at $1.1853 at 8:15 a.m. HK/SIN, around its lowest levels since late August.

Also in politics, Japanese Prime Minister Shinzo Abe said Monday he would be dissolving the lower house of parliament on Sept. 28 ahead of a snap election expected on Oct. 22.

Investors also digested comments from New York Fed President William Dudley and Chicago Fed President Charles Evans. Dudley said Monday that the central bank was on the path to slowly increasing interest rates as “temporary” factors affecting inflation faded, Reuters said. Evans adopted a more cautious tone, stating that the Fed had to wait for marked signs that prices were increasing before raising rates.

In corporate news, the sale of Toshiba’s memory chip unit to a group led by Bain Capital for $18 billion had yet to be signed. Toshiba had informed its banks on Monday that Apple, which is part of the consortium, had not agreed to conditions in the sale. Toshiba stock was up 0.33 percent in early trade, while most other Japanese tech stocks pulled back.

On the energy front, oil prices were steady after rising more than 3 percent overnight as oil producers indicated that rebalancing was gradually taking place. Brent crude tacked on 0.12 percent to trade at $59.09 a barrel, near its highest levels since mid-2015. U.S. crude shed 0.21 percent to trade at USD 52.11.